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Final Response to the Charities Definition Inquiry

NO.031

FINAL RESPONSE TO THE CHARITIES DEFINITION INQUIRY

The Government has tonight announced that the common law meaning of a charity will continue to apply, but the definition will be extended to include certain child care and self-help groups, and closed or contemplative religious orders. The Government has decided not to proceed with the draft Charities Bill.

The Government has also announced that it will delay the introduction of changes requiring charities to be endorsed in order to access relevant tax concessions.

These measures build on the Government’s response to the Report of the Inquiry into the Definition of Charities and Related Organisations that was announced on 29 August 2002.

Statutory extension to meaning of charity

In July 2003 the Government released exposure draft legislation that provided a statutory definition of a ‘charity’. On its release, the Government referred the draft to the Board of Taxation to consult with the charitable sector on the workability of the legislation.

The Government has taken advice from the Board of Taxation that the draft legislation does not achieve the level of clarity and certainty that was intended to be brought to the charitable sector.

Therefore, rather than introducing a legislative definition of a ‘charity’, the common law meaning will continue to apply. The Government will, however, introduce a statutory extension to the common law meaning of a charity to include non-profit child care available to the public, self-help groups with open and non-discriminatory membership, and closed or contemplative religious orders that offer prayerful intervention to the public.

Legislation to give effect to this announcement will be introduced as soon as practicable and will apply from 1 July 2004.

I would like to thank the Board of Taxation for their work in preparing the report. I would also like to thank all of those organisations and individuals that made submissions to the Board.

More time to comply with the new endorsement arrangements

The Government has decided to delay until 1 July 2005 the date by which charities, public benevolent institutions and health promotion charities need endorsement by the Commissioner of Taxation in order to access tax concessions relating to fringe benefits tax and the goods and services tax (GST). When initially announced, this measure was to take effect from 1 July 2004.

Legislation to give effect to this announcement was introduced into Parliament as part of Tax Laws Amendment (2004 Measures No. 1) Bill 2004 on 19 February 2004. However, the Bill has not yet received passage through Parliament. Deferral of the start date to 1 July 2005 will ensure that charities do not face unreasonable compliance costs and that they have sufficient lead time to comply with the new arrangements.

In the interim, charities will continue to be able to self-assess their status for the purpose of fringe benefits tax and GST concessions.